Securities and Exchange Board of India (SEBI) will closely monitor the movement in stock markets on Friday, the day the Lok Sabha election results are to be announced.
SEBI, along with the Reserve Bank of India (RBI) and the government, would watch for any ‘unusual’ movements on Friday, said U. K. Sinha, Chairman, SEBI, at a function organised by Associated Chambers of Commerce and Industry of India (Assocham) on Thursday.
Mr. Sinha said the regulator had been conducting daily stress tests, and “we are satisfied that the risk management systems and payment and settlement systems are working fine,” adding, “I assure everyone that we are ready to deal with any situation and will not allow those seeking to create irregularities to succeed in the market.”
Delivering the keynote address at the Assocham conference “Re-energising the primary equity market,” Mr. Sinha said there was very sluggish activity in the primary market over the last few years.
Companies were not pricing their initial public offerings (IPOs) correctly, and two-thirds of the IPO issues since 2012 were trading below their issue price. “About Rs.60,000 crore worth of IPOs in the last three years were withdrawn after filing the draft red herring prospectus (DRHP) or allowed to lapse despite receiving SEBI approval.”Pension funds
Exhorting domestic players to increase the domestic institutional space, Mr. Sinha said there was a need for somebody to create pension funds. “If that happens, we can create a robust domestic institutional network,” he added.
Of all the foreign institutional investor (FII) money coming into India, half was pension fund money, he said adding, “if our economy starts doing well, the benefits are shared by workers in other countries and not here.”
He said the FIIs played an important role here but “any talk of government or SEBI changing regulations or rules are perceived as negative and creates massive negative sentiment in the market.”
He said FII flows into India had been robust with $10 billion having come in the current calendar year of which $5.5 billion was in equity. The SEBI chairman said the regulator was looking into suggestions to increase the quota for anchor investors in IPO, and also the possibility of allowing companies to raise funds through convertibles.
Urging small and medium enterprises to use the institutional trading platform where more than 60 companies with a market cap crossing $1 billion were listed, he said SEBI, in co-operation with stock exchanges and SIDBI, had identified 5-6 SME clusters in India. “An exercise is on to identify those ready to be listed,” he added.
Reacting to charges of SEBI’s ‘activist’ role and that it was proceeding too fast on corporate governance norms etc., Mr. Sinha urged that SEBI should be judged based on the larger picture.
SEBI had come across several examples where minority shareholders were kept in the dark and their rights were not being protected.
“So, we have told companies to come to us for a time-bound comment before filing with the Tribunal as per Companies Act. The whole focus is on minority shareholder protection.
“The largest hedge funds in the world have complimented SEBI for the work we have done in this direction,” he pointed out.